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(This article was originally published by Grant on the Stewardship blog here.)
Around this time last year, I did a video called, “How Can I Teach My Kids About Money?” It was one of our most popular. As a result, we thought we’d make another “Kids and Money” video focusing on teenagers.
Teenagers are a lot more expensive than younger kids. Between school activities, summer camps, clothes, social gatherings, these things typically have parents begging their teenager to go get a job. But before they get a job, it’s a good practice to provide some education and wisdom on finances so your teens are able to properly manage what they earn. Below are five things you should teach your teenager about money.
Aside from starting this blog with something that will make parents happy, I wanted to help create a mindset. There’s a good chance that your child has been given money most of their life. This is not an ideal practice to continue as it creates an entitlement. As an adult, money is not given to us. It’s earned. Teaching your kids not to ask for money helps illuminate the reality that money is scarce and prevents them from becoming an adult who’s always looking for a handout. The best way to earn money is to serve others. Find needs and fill them.
Most teenagers will do basic math to determine how much they will get paid at a job. Hourly rate multiplied by the hours worked equals what they get paid. Right? Wrong! The big shocker to most teenagers is the big difference between this math and what they actually take home. They know about a little thing called taxes, but they rarely understand the weight of how it impacts their income. Helping them subtract 20% or so from the previous math equation can help properly set their expectations.
I recently took a trip to Cleveland. While there, I was introduced to NBA basketball player Matthew Dellavedova. While chatting, he agreed to do an Instagram Story with me to share some financial advice. His advice: “When you make more money don’t spend more money.” That was coming from a professional athlete who is a multimillionaire! This advice is so wise.
If your teenager understands how to find needs and fill them–how to serve people well–they will likely get more opportunities to earn income. This extra income should not create more spending. Being able to keep spending level, simple, and even (regardless of income), is a helpful habit to building wealth.
We live in a world that has amazingly intelligent 24/7 advertising. Businesses are literally attempting to create chemical reactions in our brains to entice purchases. The best way to combat this is to make a plan for your money before it comes in. Write down a budget. How much will you save? How much will you give away? How much will you spend, and what will you spend it on? Writing this plan down will help tame uncontrollable spending. If something comes up that’s out of the plan, your teen can say, “That’s not in my plan for this check, I am not spending money on that.”
Debt almost always requires the borrower to work to pay the debt back. Historically when people were indebted to others, the borrower would work for an arranged period of time for whomever he was indebted to until the debt was deemed paid in full. For example, if someone wanted land but didn’t have the money to pay for it outright, they could work for the landowner for an agreed-upon period. Once the time was up, the land ownership would be transferred.
Fast forward to today and though we may not be physically working for someone, we are indebted when it comes to overspending. When we take on debt, we are told we have to pay it back with interest, which makes sense. In reality, we’re becoming indebted to the lender. In order to earn income to pay back what was borrowed, we have to work. It’s a wise practice to teach a teen how long they will need to work to repay their debt. The hours, weeks, months, and even years of work they’ll be forced to complete must be weighed against what they’re purchasing with the loan. Have your teens ask themselves, “Is being forced to work more really worth the debt to purchase now?” There are many other things we can teach young adults about money, but the five listed above are a great place to start.
Husband, Dad, and Sun Valley Community Church student ministry volunteer. A Finance Expert and Founder of Stewardship. Christian Ministries major from Arizona Christian University and bestselling author.